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The dollar dropped against the pound by about eight piasters on Monday after the Central Bank of Egypt (CBE) adopted a few new measures meant to slow down the Egyptian Pound’s recent slide in value.
The bank announced it would cancel the commission that had been placed on banks and currency exchange offices, limit the number of currency auctions to just two a week, on Monday and Wednesday, and limit the range of rates at which banks could sell and buy currency from one another.
“The Central Bank is trying to use the tools they have to manage the decline of the Egyptian pound,” Mohamed Abu Basha, an economist at EFG Hermes, told Egypt Independent.
He said the Central Bank is in a difficult position, trying to prevent a drastic drop in the currency’s value amid the country’s current instability. Uncertainty about the delivery of the US$4.8 billion IMF loan, the country’s best hope for an influx of foreign currency, has only made matters worse, Abu Basha said.
On Monday after the Central Bank’s decisions, the pound rose against the dollar, with the day closing at LE6.70 to the dollar for buyers and LE6.73 for sellers. On Tuesday, the pound fell ever so slightly, closing at LE6.69 to the dollar for buyers and keeping the same price for sellers.
Foreign exchange offices say the new measures have left currency offices high and dry, as the fewer auctions mean they are not receiving enough foreign currency to meet their demand. Banks did not provide foreign exchange offices with a sufficient amount of dollars on Monday, Alia al-Hariry, a member of the General Division for Foreign Exchange Offices, told Al-Masry Al-Youm
The CBE had forced banks and exchange companies to impose a commission on any dollar or foreign currency sales, on the condition that the currency be exchanged according to official rates. The commission was 0.5 to 1 percent of the pound value resulting from the transaction.
Now, the commission can be no more than one or two piasters, said Abu Basha.
In a related measure, the CBE can now only buy or sell dollars or their equivalent to other banks in a band of 0.01 pounds above or below the weighted average bid at the Central Bank's regular currency auctions, one dealer told Reuters, to keep exchange officers from selling pounds at less-than-official value.
Previously, the limit had been 0.5 percent above or below the average bid.